The Bank of England (BoE) is set to reduce its key interest rate by 25 basis points (bps) in Q3 and Q4, bringing the rate down to 3.75% by the end of 2025. This move aligns with the May 2025 rate cut, reflecting the central bank’s continued efforts to support economic stability amid global trade uncertainties.
Key Highlights:
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Gradual Rate Reductions: The BoE has already lowered rates to 4.25% in May 2025, with further cuts planned in Q3 and Q4, signaling a cautious easing approach.
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Inflation & Growth Outlook: UK inflation stood at 2.6% in March 2025, with projections indicating a temporary rise to 3.5% in Q3, before stabilizing. GDP growth forecasts have weakened to 0.75% for 2025, prompting monetary policy adjustments.
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Global Trade Impact: The BoE’s decision follows escalating trade tensions, particularly US tariffs affecting UK exports, which have raised concerns over external demand shocks.
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Market Reactions: The pound has weakened postannouncement, with bond yields rising slightly, reflecting investor expectations of further easing.
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Future Policy Direction: Analysts anticipate one to two additional 25 bps cuts in 2025, with the next adjustment likely by August, as the BoE balances inflation control with economic stimulus.
With monetary policy shifting toward gradual easing, the Bank of England aims to stabilize growth, ensuring longterm financial resilience.
Sources: Bank of England, Times of India, Tekedia